You need to pick the right funds to get the income you need when you retire. Select a poorly managed stock fund and you could short-change yourself.

You also must deal with the gyrations of stock and bond prices. Economic factors and bad news about a company or industry can send your investments into a tailspin.

How to avoid these problems? There's no perfect way to invest.

But you can remove some of the guesswork by putting your retirement kitty in stock and bond index funds that track the market averages. Index funds have outperformed the majority of actively managed stock funds over the long term, according to Morningstar Inc., Chicago.

Also, split up your investments. Consider stocks, bonds and cash. This way, when one investment zigs, the other zags. So gains in one type of asset should offset losses in others.

Beyond that, avoiding the mistakes of others may be half your battle. Here are some typical mistakes made in retirement plans, according to Ben A. Jacoby, financial planner with Brinton Eaton Wealth Advisors, Morristown, N.J.

Failing to integrate 401(k), IRAs and other retirement plans with a total portfolio. "Look at the whole picture and then allocate across the appropriate accounts accordingly," he advises.

Failing to properly consider taxes in asset-allocation. REITs, for example, probably should be in a tax-advantaged retirement plan due to the fact that they pay high dividends at the marginal tax rate. Conversely, investments that produce long-term capital gains generally are best positioned outside of a retirement plan.

Failing to avoid high fees. In some 401(k) plans, participants pay up to a whopping 2.5 percent of assets in expenses. These fees often are hidden. If your plan is fee-heavy, Jacoby suggests that you move your money to a rollover IRA as soon as possible.

Believing you can't touch the principal in retirement. Suppose you need to withdraw 5 percent annually from your plan once you're retired. Too many believe they must earn that amount from interest and dividends, and therefore load up their plans with bonds, forgoing growth investments. As part of the annual withdrawals, Jacoby says, it's appropriate to sell individual holdings and use the proceeds. It's all right to do this, he says, because over the long term, a conservative balanced portfolio should return about 7 percent to 8 percent a year.

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Spouses Gail Liberman and Alan Lavine are syndicated columnists. You can purchase Alan Lavine & Gail Liberman's latest book Quick Steps to Financial Stability (QUE Publishing 2006) online at www.moneycouple.com or at your local bookstore. E-mail them at MWliblav@aol.com.